The banking sector is in serious trouble and it's likely to get worse with the Federal Deposit Insurance Corp revealing that the number of banks on its "problem list" has jumped 30 per cent, from 90 to 117. Banks have had their worst earnings sinc 1991, although much of it is self-inflicted.
The world's largest banks and securities firms have announced more than $500 billion in asset writedowns and credit losses. Not a good scene and it looks bleak with part of the process involves looking for problems such as an abundance of delinquent loans without sufficient reserves to cover the losses, weak risk management policies or a lack of cash to cover withdrawals. Regulators then give the banks a report card, assigning a composite rating based on the bank's performance in each category. Banks that receive a rating of 4 or 5 are put on the list.
And that's a worry because the report suggests the bankers, in their greed to rake in millions, have neglected to do the basic stuff that bankers need to do.
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